Transportation Labor Testifies on Privatization in Passenger Rail

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
RAILROADS, PIPELINES AND
HAZARDOUS MATERIALS SUBCOMMITTEE
ON
FINDING WAYS TO ENCOURAGE AND INCREASE
PRIVATE SECTOR PARTICIPATION IN PASSENGER RAIL SERVICE

March 11, 2011

I am pleased to testify on behalf of the 32 member unions of the Transportation Trades Department, AFL-CIO (TTD). I want to thank Subcommittee Chairman Bill Shuster and Ranking Member Corrine Brown for inviting me to testify on the future of the critically important passenger rail sector.

The Transportation Trades Department, AFL-CIO (TTD) represents 32 unions whose members work in the aviation, rail, transit, highway, trucking, longshore, maritime and related industries. For more than 20 years, TTD has advocated for robust federal investment in transportation systems and infrastructure that creates jobs, spurs economic growth and allows passengers and freight to move more safely and efficiently.

Let me say at the outset that I appreciate the Committee’s desire to hear from the labor movement on this important transportation policy issue. We have always enjoyed a strong working relationship with members of this Committee on both sides of the aisle and look forward to continuing that relationship as you tackle the nation’s most pressing transportation challenges surrounding the mobility of Americans and the safe and efficient movement of goods.

Recently, the TTD Executive Committee met to develop and adopt major policy priorities for 2011. Among the actions taken by the leadership of our member unions was the adoption of a clear policy making the case for Amtrak as the centerpiece of high speed rail in America. That statement, adopted March 3 by our Executive Committee, is attached to my testimony.

Let me start with the views expressed in that statement.

Amtrak and its employees have a positive story to tell – a story that cannot be ignored as this Committee considers various proposals to advance passenger rail, including measures designed to boost private sector participation. Amtrak ridership is on the rise with growth reported in each of the last 16 months. Annual ridership records were set in seven of the last eight fiscal years. On the Northeast Corridor (NEC), Amtrak is operationally in the black as NEC performance metrics continue to improve. And now that the company has stable senior management with a long-term vision and a Board committed to Amtrak’s growth and expansion, the future of the company is promising – that is, if Congress gives Amtrak and its workforce the chance to succeed.

Amtrak has recently offered a vision for growth and improved efficiency, including plans to build the Gateway passenger rail tunnel under the Hudson River and a broad proposal to upgrade and transform the NEC into one of the premier rail corridors in the world. Amtrak is also poised to upgrade its aging rolling stock, and has plans to spend $11 billion over the next 14 years on this effort. Overall, Amtrak is positioning itself as a provider of higher speed rail service in corridors and regions across the country.

I would submit that those who seek to slash Amtrak’s budget or privatize services – and in essence set the company up to fail – ignore the fact that the rail carrier and its skilled employees are performing better than at any time in its history. And now it is up to Congress, together with the Obama Administration, to foster – and not derail – the continued transformation of Amtrak as demand for passenger rail service is on the rise.

Amtrak funding is also more stable today than it was just a couple of years ago. In part, that is due to the work of this Committee in passing the Passenger Rail Investment and Improvement Act of 2008 (PRIIA) which marked a significant turn in the history of Amtrak and passenger rail. We have a President who has made it a priority to build and expand the nation’s passenger rail capacity. In fact, unlike previous Administrations, the President’s recent budget calls for billions in new funding for Amtrak and high speed rail as part of President Obama’s longer-term vision. As unveiled last Labor Day, the President plans to make this the generation that rebuilds, expands and modernizes our multi-modal transportation system and infrastructure.

These unprecedented efforts to address our mobility needs are critical for our country, which according to the U.S. Census Bureau is projected to grow by 80 million people in the next 25 years, a statistic that makes our passenger transportation challenges that more daunting. Together, the President’s commitments and the foundation established by PRIIA will ensure that millions of Americans will have access to better quality, higher-speed passenger rail in the years ahead. To keep the momentum going forward, it is critical for Congress to fully fund Amtrak consistent with the PRIIA authorization levels.

Let me offer some observations about the private sector’s role in our transportation system. Obviously the private sector, together with the public sector, plays an enormous role in building, maintaining and operating the nation’s passenger and freight transportation system. The private sector also plays a major role – one that we are working hard to enhance and increase – in manufacturing the goods and equipment needed to operate, maintain and build our transportation network. Without a strong, well capitalized private sector in our transportation industry, America will not remain the world’s strongest economy.

But we must also remember that some aspects of our transportation system are not viable candidates for wholesale privatization. And I would submit that Amtrak and intercity passenger rail in general are best left as a public provider of an important and expanding transportation service. Is Amtrak perfect? No. But it is delivering on its central mission of providing a national and interconnected network of passenger rail that is safe, efficient and accessible to our growing population.

Those who believe that privatization may be a panacea are ignoring the fact that under this model, service would only be provided where it is profitable to do so for private investors and shareholders. This would abandon major regions of the country and leave passengers who need the service – or perhaps live in areas that lack legitimate alternatives – to fend for themselves. None of the world’s finest passenger rail systems operate under this type of model. The fact is that their governments are spending hundreds of billions of dollars in capital and are providing subsidies necessary to advance their respective passenger and freight transportation needs. The idea that these systems around the world are profitable and operate independent of government assistance is not supported by the facts.

In the 1990s, British Rail privatized its passenger service as part of a broad based public service outsourcing effort. This endeavor did not increase efficiency but instead unleashed a torrent of problems. Fares jumped, severe layoffs were implemented, and maintenance and safety suffered. In fact while the quality of service deteriorated, accident rates increased. Tragically, these changes came to a head with the Stafford rail crash in 1996. In all, 31 passengers died in this accident which was linked to the problems stemming from privatization. In 1999, after less than a decade of private performance, British passenger rail reverted to a system that is not dissimilar to Amtrak today. But these difficulties with private rail operations are not confined to the United Kingdom. Robert Scardelletti, International President of the Transportation Communications International Union/IAM, in his testimony before the Transportation and Infrastructure Committee on January 27, 2011, provided examples revealing that private operators often have difficulty delivering the service they were contracted to provide.

As members of the Committee probably know, Amtrak’s existence can be traced to the formerly private sector passenger rail services run by the freight carriers. But throughout the 1960s, private passenger rail service providers were losing large sums of money and racing toward bankruptcy. The train service these money-losing operations provided was badly deteriorating as equipment was run down, schedules became erratic and unreliable, and as the overall quality of train travel was on a downward spiral. By 1969, these problems led to the merger of the Pennsylvania Railroad, the New York Central Railroad and the New York, New Haven and Hartford Railroad. Despite the merger, the newly created Penn Central Railroad collapsed financially shortly afterward in June 1970 resulting in the largest bankruptcy in U.S. history at that time. Amtrak was then created in 1971 by the U.S. Congress and the Nixon Administration.

In the last 40 years, Amtrak has too often been forced to limp along from one budget crisis to the next. Amtrak has faced chronic under-funding, repeated attempts to break it up, and lacked a long-term commitment that has made it impossible to run the railroad the way it should run. The fact is that no public or private infrastructure operation can succeed if it is always capital-starved and uncertain about the next year’s budget. In a capital intensive business like passenger rail, it is impossible to realize the vision of higher speed passenger rail corridors in various parts of the country without a steady and reliable stream of federal support.

Let me also state that if entities other than Amtrak are going to provide passenger service at any level, it must be ensured that the labor protections and statutes that currently apply to Amtrak, apply to these entities as well. Specifically, rail statutes including the Railway Labor Act, the Railroad Retirement Act and the Railroad Unemployment Insurance Act should apply to rail workers. It would make no sense to allow private sector competition but then create an artificial cost advantage over Amtrak based on coverage of federal statutes. In addition, Davis-Bacon prevailing-wage laws should apply to all construction work funded with federal dollars.

Investing and supporting passenger rail can also support our domestic transportation manufacturing sector and create good jobs here in America. Thanks to the Obama Administration’s stringent application of Buy America domestic production requirements, which are governed by the Federal Railroad Administration (FRA), federal intercity passenger rail and high-speed rail funding require domestically manufactured rail equipment. FRA mandates not only that taxpayer funds be used only for U.S. manufactured goods and equipment, but also domestic concrete, iron and steel. I submit to this Committee that it is good economic policy to insist that if our country is going to invest billions in our transportation system and infrastructure, those investments must be used to boost and create good middle-class domestic manufacturing jobs. Because high-speed rail development is just beginning, strict adherence to domestic content requirements will afford investors and manufacturers the opportunity to develop their operations early, make the necessary investments to participate in the marketplace and capitalize on passenger rail’s long-term promise. In the long-run, reliable and sustainable federal investment will boost private sector industry participation and job growth along the entire supply chain.

It is our sincere hope that the Committee will join us in advocating for Amtrak’s transformation which is a success story in the making. Too often in Washington, time is wasted creating new federal programs rather than perfecting the ones we already have. Amtrak is one of those programs. It is not a “Soviet-style” railroad, although I would add that in recent years, Russia has spent more than three times the amount the U.S. has on rail as a percentage of its economy. Throughout its history, Amtrak has been forced to “run a business,” so to speak, with inadequate capital. This Committee has a long history of making sure our transportation system has the capital and operating investments it needs to support the world’s greatest economy. It is time to stop making Amtrak and its workforce perform miracles on shoestring budgets. The rest of the world seems to understand that when it comes to transportation systems and infrastructure, you can’t cut your way to prosperity.

I look forward to working with the Committee to advance passenger rail policies that embrace a robust role for both the public and private sector. Without a federal vision that has at its core sustainable federal funding and a stable Amtrak operation, the goal of boosting private sector participation – including a renaissance in domestic transportation manufacturing – will not be realized.